Zachary Navo, 38, of Visalia, Calif., was arraigned last week on five felony counts of insurance fraud after a state Department of Insurance investigation revealed he allegedly underreported wages by over $2.5 million.
Navo was allegedly attempting to fraudulently reduce workers’ compensation premium payments, resulting in a loss of over $135,000 to insurance entities, state regulators said.
In December 2017, State Compensation Insurance Fund (SCIF) issued Navo a workers’ compensation insurance policy for his private security business, Element Security Solutions, Inc. In June 2018, Navo completed a payroll report indicating he had $80,500 in payroll for the first six months of the policy period. Navo failed to submit subsequent payroll information and failed to comply with an end of policy audit.
During the investigation, a review of Employment Development Department (EDD) records for the twelve-month policy period revealed $2,098,394 in payroll was reported to EDD for Element Security Solutions, Inc., which revealed an underreporting of approximately $2 million in payroll to SCIF. The underreporting resulted in a $134,761 loss in premium owed to SCIF.
Investigators also discovered that Navo is a licensed insurance agent and owns a secondary entity, Navo Financial, Inc., an insurance and financial solutions business, in which Navo reported $504,302 in payroll from 2016 to 2019.
However, EDD records for the period of 2016 to 2019, found Navo reported $1,047,482 in payroll to EDD for Navo Financial, Inc., demonstrating an underreporting of $543,180 in payroll and resulting in a $1,164 loss to a different insurance company.
Under California law, employers are required to maintain workers’ compensation insurance to protect their employees in the event of an accidental on-the-job injury. To ensure proper coverage, employers must accurately report the number of employees, job classifications, and the amount of payroll expended.
One of the common ways in which employers avoid paying insurance premiums is to underreport a business’s payroll by providing false payroll reports to their insurance company, state regulators said.
This case is being prosecuted by the Tulare County District Attorney’s Office.